WATER rate-payers in the region could be footing the bill for water shortages in other parts of the UK under controversial Government plans, it emerged last night.

Proposals from the Department for Environment, Food and Rural Affairs (Defra), and the Environment Agency means consumers in the North-East and North Yorkshire might have to pay an extra £20 a year on top of their current water bills.

Water companies throughout the country pay an "abstraction" charge to the Environment Agency for licences to take water out of the UK's lakes and rivers. However, because water levels in some lakes and rivers in other parts of the UK are getting low, causing environmental damage, some licences will have to be revoked - meaning the Environment Agency has to pay compensation to the affected companies.

But under the plans, all water companies in the UK may have to foot the bill for the compensation.

This means companies such as Northumbrian Water and Yorkshire Water could be forced to pay up to £6m to the Environment Agency over the next five years - or about £1m a year - to compensate water companies in other parts of the UK where lakes and rivers are running dry.

This is despite the fact that water is in plentiful supply in the region, where no licences will have to be revoked.

John Mowbray, head of corporate affairs at Northumbrian Water, said it was unavoidable that the extra costs would be passed on to bill payers.

"The regulatory system, through Ofwat, would pass those costs through the system and they would be passed on to consumers.

"Basically, if it is costs that we can't control, the regulator would allow us to pass them on to the water prices."

Northumbrian Water said the costs of about £1m a year, which is additional to the £18m it already pays to the Environment Agency for abstraction licences, would mean £20 on top of every annual water bill.

Graeme Warren, area manager of the Environment Agency, said the agency's consultation period on the proposals had just ended.

He said Defra and the agency would now come up with firm proposals for the future.

"We will decide whether the charges need to be nationally or regionally imposed. Obviously, companies like Northumbrian Water are arguing that only the companies within the affected regions should have to pay extra, but that is just one view that we have to take into account.

"It is true that the North-East does have a plentiful supply of water."

Andrea Cook, chairman of the Consumer Council (CC) for Water, said: "CC Water, the North-East Chamber of Commerce and Northumbrian Water are united in their view that the proposals will have a disproportionate and unacceptable impact on consumers and businesses in the region."